108 T.C. No. 19
UNITED STATES TAX COURT
SPRINT CORPORATION AND SUBSIDIARIES,
F.K.A. UNITED TELECOMMUNICATIONS, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13159-94. Filed April 30, 1997.
P, a telephone company, purchased certain
telecommunications equipment, digital switches, that
required computer software to operate. P claimed
investment tax credits (ITC) and depreciation
deductions under the accelerated cost recovery system
(ACRS) with respect to the total cost of each digital
switch, which included the cost of the software used in
each switch. R determined that P's expenditures
allocable to the software did not qualify for the ITC
or depreciation under the ACRS.
P treated property known as “drop and block” as
5-year property, as defined in sec. 168(c)(2)(B),
I.R.C. R determined that the property was 15-year
public utility property. For the years in issue, the
property was depreciated under the ACRS.
1. Held: P's expenditures allocable to the
software qualify for the ITC and depreciation under the
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